Dow on track after 300-point weekly gain

Price at time of writing – 15,237.

I have returned to my long-term analysis on the Dow, focusing on a chart which is stripped of all but the most important percentage lines, and dates from the origins of the bull market in 1984.

Importantly, it highlights all the key percentages that originate from the Dow Jones' intraday low recorded during the share market crash in October 1987. 

As it has every year since, the return of Black Monday's anniversary concerns me. Ominously, this year its anniversary date of 19 October comes just two days after the US government will apparently go into default on its sovereign debt obligations (assuming no solution to the current impasse is struck beforehand). 

Despite this, my approaching target band of 16,023-16,180 has at its epicentre a line representing a 900% rise from this memorable low. Supporting this on today's long-term chart is another line representing a 150% advance from the unique low in March 2009. Together, they provide a compelling target on the Dow, and the 300-point rise on the index since my update last week confirms this remains on track.

Last week the Dow bounced sharply having completed a pull-back that measured 6.25%. As noted previously however, rises and falls of 6.25% or 8.33% have occurred on so many occasions in the past few years that they now appear normal behaviour. In isolation this recent pull-back makes no impact on the chart.

Recommendation: Stay long, target 16,175. Stop-losses can be left unchanged and triggered on a break below 14,350.

Dow Jones chart

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